China passenger car market review, 2005

The sales amount of passenger cars in China totaled 3,112,421 units in 2005, a 29% growth year after year, in which the sedan accounts for 2,786,009 units, MPV for 152,245, and SUV for 174,164 units. The amount is far more than it is expected, and the robust growth beats estimates of most analysts.

However, the profitability of the auto industry slips while the passenger car sales rise. According to the statistic from the Ministry of Commerce, 6351 players in the auto industry completed industrial gross output of 1192.9 billion Yuan, rising 8.60% year after year, 8.89 % lower than the that of the previous year; the sales value totaled 1189.5 billion Yuan, rising 10.65 % year after year, 6.23 percent lower than that of the previous year; and the total profit amounted to 52.6 billion Yuan, declined 24.33% year after year, 18.38 percent more than that of the previous year.

The statistic shows that the profitability of the complete vehicle industry declined from 9.11% in 2003 to 6.85% in 2004 and 4% in 2005, even lower than the manufacturing industry overall profitability average of 4.46%.

The slip of profitability attribute to the intensified competition, followed by the rationalization of consumption and the rising cost of auto-related material, like steel and crude oil. Parting to the high profit of the sector, China’s auto industry is approaching the international standard of profitability.

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